James LaRue says he lost $150,000 when his instructions to his employer on where to invest money in his retirement plan were ignored. Now the Supreme Court will decide whether a federal pension-protection law gives LaRue the right to sue to recover his losses. Arguments in the case, which has far-reaching consequences, were scheduled for Monday.

LaRue, who used to work at a management consulting firm, is among the 42 million workers who contributed to a 401(k) retirement plan. At issue in LaRue's case are the limits to lawsuits under the Employee Retirement Income Security Act. It regulates private-sector retirement plans holding over $5.5 trillion in assets, including $2 trillion in an estimated quarter of a million 401(k) plans across the country.

Unlike traditional pension plans, participants in 401(k) plans — named after a section in tax law — do not know how much money they will receive in retirement. It depends on how well their chosen investments have performed.

ERISA was designed to safeguard pension fund money from misappropriation. The 1974 law followed the failure of some companies to pay promised pensions and extensive looting of some pension and welfare funds at companies and labor unions.

Class-action suits filed under the law over the past decade have targeted Enron, WorldCom and other major companies tainted by scandal.

From a legal standpoint, it is less clear what action an individual account holder can take against a retirement plan when the conduct at issue is less than criminal.

LaRue says that in 2000 and 2001 he requested changes in his investment allocations in mutual funds that were available to participants in his company's 401(k) plan. He says the requests were not honored.

"I wanted to sell stocks and move to cash because I thought the market would head down. I was right," LaRue said in a telephone interview. "I didn't find out that the plan had not executed my transactions until 10 months later. They had a substandard reporting system. I left the firm. I asked them again to make the change, and they still didn't do it. I don't know why."

The Bush administration, siding with LaRue, says an appeals court ruling against him would leave participants in "the most common form of pension plan who have been injured by a breach of fiduciary duty without a meaningful remedy from any court."

LaRue sued in 2004, saying he had tried to avoid going to court and instead sought to reach a settlement with his former employers. He was unsuccessful, as it turned out.

"We had already been through one lawsuit over stock in the company, which I won," said LaRue. "Even though I prevailed, it was not pleasant. I didn't want to go through it again."

Business groups assign a different motive to the long delay in filing the second suit, saying LaRue was waiting to see how the market performed. If the value of his investment went up, he made money. If it went down, he would head to court.

LaRue, according to the American Council of Life Insurers, was "squarely in the proverbial catbird seat. ... He could not lose. ... Granting LaRue relief in this case would encourage other plan participants to do the same."

In papers in the case, the council said denying LaRue the right to sue for damages would ensure that a plan participant who claims his investment directions were not followed would act promptly, seeking a court order if necessary.

When ERISA was passed, decisions on where to invest money were out of workers' hands. Under 401(k) and other types of plans, employees make the choice.

"If they're going to shift the responsibility for a plan from a company to the individual, then they should listen to our instructions," LaRue said.

ERISA pre-empts state laws relating to employee benefit plans, meaning LaRue cannot use them to sue, and therein lies his problem.

Besides protecting workers, ERISA was aimed at encouraging employers to set up retirement plans and in doing so, Congress limited the right to sue. Just where the line is drawn is the question in LaRue's suit, though the Supreme Court in past decisions on ERISA has drawn the line in favor of employers.

The business world says allowing cases like LaRue's could lead to a wave of suits without merit.

"There is a cost associated with any expansion of remedies," the U.S. Chamber of Commerce said in a filing in the Supreme Court supporting LaRue's former employer.

Opening up plan administrators to liability will increase the cost of running ERISA plans, result in fewer being established or reduce the level of benefits, the business group says.

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